Mechanism to check capital gain tax evasion discussed

FE Report (October 25, 2010)

Leaders of the bourses, market regulator and tax collectors held a talk Sunday to devise mechanism to check evasion of capital gain tax slapped on placement shareholders.

They have discussed the role of the Securities and Exchange Commission (SEC), Dhaka and Chittagong

stock exchanges (DSE and CSE) and the CDBL (Central Depository Bangladesh Limited) on non-payment of the gain tax.

"We have proposed that the NBR should take the responsibility of collection of the tax if any of the taxpayers under this category did not pay tax voluntarily," DSE president Shakil Rizvi told the FE Sunday.

The NBR is the authority to find out tax evaders if any of the placement shareholders sold out shares without making declaration after expiry of the one-year lock-in period, he said.

According to securities rules, pre-IPO (initial public offering) placement shares are locked for one year from the date of issuance of prospectus.

In the first quarter of the current fiscal, the placement shareholders paid Tk 300 million income tax.

The NBR officials said they have held the discussion after taxmen have found some evidence of tax evasion under the new rule.

"We want to ensure proper tax collection from the share market. The NBR wants to make the gain tax collection user-friendly by removing hurdles," said a senior income tax official.

DSE, CSE, SEC and NBR also discussed the impact and possibility of re-locking the shares by CDBL in case of non-payment of gain tax, he said.

The NBR will hold another meeting soon with the stock exchange leaders and regulators, he added.

In the budget for 2010-11, the government has imposed 5.0 per cent capital gain tax on securities of sponsor shareholders and directors of bank, financial organisations, merchant banks, insurance and leasing companies, portfolio management companies, stock dealers and stock brokers.